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It's been a good week for Kontoor Brands, Inc. (NYSE:KTB) shareholders, because the company has just released its latest first-quarter results, and the shares gained 2.7% to US$64.53. Revenues were US$652m, approximately in line with expectations, although statutory earnings per share (EPS) performed substantially better. EPS of US$1.09 were also better than expected, beating analyst predictions by 11%. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
After the latest results, the five analysts covering Kontoor Brands are now predicting revenues of US$2.40b in 2021. If met, this would reflect a credible 6.7% improvement in sales compared to the last 12 months. Per-share earnings are expected to bounce 44% to US$3.42. In the lead-up to this report, the analysts had been modelling revenues of US$2.39b and earnings per share (EPS) of US$3.51 in 2021. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a small dip in their earnings per share forecasts.
Althoughthe analysts have revised their earnings forecasts for next year, they've also lifted the consensus price target 11% to US$64.67, suggesting the revised estimates are not indicative of a weaker long-term future for the business. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Kontoor Brands at US$89.00 per share, while the most bearish prices it at US$42.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. For example, we noticed that Kontoor Brands' rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 9.1% growth to the end of 2021 on an annualised basis. That is well above its historical decline of 6.0% a year over the past year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 9.6% per year. So while Kontoor Brands' revenues are expected to improve, it seems that it is expected to grow at about the same rate as the overall industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Kontoor Brands analysts - going out to 2024, and you can see them free on our platform here.
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Kontoor Brands , and understanding these should be part of your investment process.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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